Dhofar Tourism Company SAOG (DTCS) Earnings Call Transcript & Summary

Good afternoon [Foreign Language] Welcome all of the investors and people who are in the call on behalf of Dhofar Tourism Company, I welcome all of you. The purpose of today's presentation is to give you a feedback and present to you the 6 months accounts, which was published in the stock market and the presentation will be in two sections. One, I, as the Chairman of the Audit Committee, I'm going through the financial statements, and if there are any questions and answers, you're quite -- you're welcome to ask me while the presentation is on. And the second part of the presentation will be given by madam Najla, who is the CEO of the company, and she will focus on the collaborations and other events, which are mentioned in the director's and Chairman's report. So if I start off on the financial statements, if you look at the financial performance of the Dhofar Tourism Company for the last 6 months ending June '25, there's significant increase in the revenue, for example and profitability has improved. So for the corresponding period June '24, our total revenue from operation was OMR 886,000. This has increased to 956,000 for this 6 months. And our gross profit has increased from OMR 127,000 to OMR 205,000. Now this is a very interesting and significant turnaround because if you go back a few years before, the company was losing money at the gross profit level. So now I would say the ship has turned its direction, and we are seeing an increase in gross profit. So that's a good news for the company and for the shareholders that the actions taken by the Board and the management has shown some results. And we are declaring a small profit of OMR 3,600 from the operations for 6 months. Now compared to that to last year 6 months, we are at OMR 50,000 loss. So that again, you can see a change in the direction of the operations. So that's the good news. Where we are losing money is on the finance cost and the depreciation. So for the loss for this period is OMR 374,000 compared to loss of a similar period last year of OMR 438,000. The loss reduced a little bit, but not too much. And that is one of the biggest challenge at the moment for the company, that the current Board is looking at how to fix this scenario from a loss-making to profit-making. And there are 2 elements to that: one, is depreciation is a noncash item. So that's an investment in the property and that will continue. So if you look at loss before depreciation, last year, it was OMR 135,000, now it is down to OMR 97,000. So there is a slight improvement in that but more has to happen. The key to the hotel success in turning around and having a cash profit overall is obviously income from operations and our room revenue. So that's the key driver, which gives us the money. For that, Madam Najla will talk about what are the initiatives happened so that we start building up the revenue. Traditionally, our model has been that quite a lot of revenue during the winter seasons. And that winter season starts from mid-October and goes up to mid-March. That season is primarily a charter business coming out of tourists from Europe, who come for the weather. [ Mirbat ] has got a beautiful weather in winter. So a lot of the tourists are taking infused in that weather from the cold of the Europe. So that area is doing well. Our objective now is to start increasing that revenue also further by making sure that all the hotel rooms are now fully operational. In the previous year, our [ showers ] were not working and there were a lot of rooms not operational. So a lot of fixed assets, with this CapEx was incurred to make everything operational. Now all the rooms are operational, and the [ showers ] are also operational. So that is one sector of the revenue. The challenge in the past has been our summer months, the Khareef season. And it's very unfortunate that's the best season for local tourism and the regional tourism and a lot of -- and we were losing out of that. And this is where the focus is of the management to make sure that our Khareef occupancy goes up. This year, in August, we have done much better than last year. And I'm sure next year it will be much better. So our downtime starts from April, May, June, July up to September. And that is the month where a lot of activity is being planned and will change the dynamics. And if that we are successful in filling the rooms in that, then we will return to profitability straightaway. So that's very clear. So that's on the profitability side. Now if I share the balance sheet, our total asset is OMR 56 million, that is as of 30th of June 2025. Out of the OMR 56 million, property, plant and equipment, which is the hotel related is OMR 27 million. And then we have in land of almost OMR 28 million. Now that is an asset which is still not being utilized. And if you look at the Chairperson's report, there are plans to develop the master plan for the area and have activities in there. And that is the future of the company. The development of those unutilized land, which is a massive area is what is going to turn the company around. We are a company, which is very asset rich, [ OMR 58 million ] worth of assets. And our total borrowing is only OMR 3.6 million. So as a net asset of the company, the total equity of the company is OMR 46 million. That's why if you look at our net asset per share is OMR 3.2 per share is the net asset per share. So a very strong balance sheet, continuing liabilities under control. Our borrowing and gearing is under very positive scenario. If you read the Chairperson's report, the final touches for the master plan is almost getting ready, and Najla will give you some more details on that, which is what is going to turn the company around. And for that, obviously, we will be talking about rights issue because without the rights issue, we cannot go to the first phase of our real estate development. So this is a very brief high-level summary of the financial statements and the results for the last 6 months. If there are any questions, I'm quite happy to take them before I hand it over to our CEO, Najla.

I have a question Mr. Khaled regarding the accumulated loss in the balance sheet.

Correct. we have an accumulated loss of OMR 2.3 million.

Yes, that's in the financial position. However, if you look into the statements of change in equity, the accumulated loss there mentioned is about OMR 14.5 million.

Sir, that was the opening position. When we had last year, if you remember, we had accumulated losses of OMR 14.5 million. Then we did a capital reduction because under Article 147 of the Commercial Law, our -- if the capital of the company is eroded more than 50%, then the company is mandated to take some action. So this was decided at the shareholders' meeting. We had an extraordinary general meeting in which this accumulated losses was wiped out. So we -- so the loss today, you see is for the last 2, 3 years, 2.5 years.

Yes, which is OMR 2.3 million?

Correct. Yes.

And is there anybody doing a check on depreciation if these numbers are reasonable?

Yes. We have an external auditor, who does on an annual basis, and we have an internal auditor who checks every quarter results.

Because it seems high on a 6 month basis, you have around OMR 400,000.

Depreciation is for the 6 months is OMR 276,000 or in a year, it will be OMR 0.5 million. So if you look at a property of OMR 27 million, OMR 0.5 million is reasonable, yes.

Are these properties actually appreciating in value, not depreciating?

Yes. And that's why we have the revaluation reserve also. So you see under the accounting policy, you need to depreciate the assets, but you can also do the revaluation. So other than the land, which appreciates, equipment will depreciate. You got the air conditioning unit, you got the power units. So those are depreciating, furniture's and fixtures are depreciating.

And that is OMR 200,000?

Yes. If you look at the depreciation, the bulk of the depreciation is coming out of the building, which is OMR 250,000 plus, yes. Then you got motor vehicles, and you've got tools, you've got equipment and other things. And building is subject to depreciation, obviously, because there are components in the building which depreciates. Is the land which is the one which is of a real value if you think about it.

And the potential?

And the potential, because this is a dead asset, the land. It's a huge amount of land, almost 2 million square, which is unutilized. And that's the strategy of the current management and the Board is to actually utilize that the land, which is not giving any return. And that's the added value. So when Najla will talk about the real estate development, that development will take the company into a very different league because we don't -- we will not rely on only one hotel, which is Wyndham. At the moment, we've got a huge piece of land and one hotel called Wyndham, which is generating a small amount of revenue, but that's not enough. So that's the real way forward and the vision of the company is to leverage the unused asset and add value to it and generate income.

Yes. Okay. I have another question regarding the deferred tax liability, OMR 5.8 million. Are these income tax? What are they? Are they tourism tax?

No, deferred tax liability is on the basis that if we sell these assets today. Let's say, we sold our land, then we'll end up paying tax of OMR 5 million.

But where it's coming from?

It's coming from the different sector, the cost of the land and the total value of the land today. So it's basically a theoretical number sitting there. It can only happen if we sell the land. And eventually, what will happen when we do the development, we'll be selling parts of the land. Let's say we put villa in there and we sell it to somebody who buys the villa. So that person who buys the villa will get the freehold [indiscernible] in his name or her name. Now at that stage, we'll have to pay tax because we would have made some profit on it. So this OMR 5 million tax is on the entire -- this is the entire thing. So this OMR 5 million will happen over the next 20 years slowly.

So it's just a provision. It's not really tax authority, they will not come after us tomorrow.

No, they cannot come because it's not happened. So deferred tax is required under the international accounting standards. That's what it is. Any other questions, gentlemen, ladies?

No, not from my side.

I'll hand over to Madam Najla, our CEO. She will talk about the real estate projects and other collaborations with -- which is mentioned in the Chairperson's report. So thank you. Over to Najla.

Thank you, Mr. Khaled, and thank you. First of all, I would like to welcome everyone who's tuning in and have the interest to know more about what is Dhofar Tourism doing. I think the most important thing that we're working on right now is Mirbat, which is the project Mirbature, I think. It is an ITC project, and it is going to be in 10 phases, and we are launching the first phase somewhere around by the end of Q4. It is a mixed use project has elements of tourism, residential and commercial. Plus also it is based and inspired by the authentic character of Mirbat and what it has of beauty and heritage and history. And with every step in creating this master plan, we are honoring our history and our heritage. We went through different engagement and collaboration with different architect companies internationally, trying to have a very clear stand on what is the latest trends in this kind of projects, ITC projects. And we are happy to say that we are ready and the Phase 1 is going to be launched and it will be available for everyone to look at it and start buying units in that Phase 1. The second thing I'd like to speak about is our strategic partnership with the great owner. We would like to announce that we have started a strategic partnership with the Office of the Dhofar Governor, His Highness Sayyid Marwan Al Said, and this was highlighted in his support in Dhofar's Cup, International Cup that was just concluded a couple of days ago. So this kind of international events bring attention to the uniqueness that we have in Dhofar and having this beautiful event in Mirbat actually is exactly what we are doing with Dhofar Tourism, we are reviving our history. We are reviving our values. And we are bringing internationally recognized events to international levels and accredited by international entities like the ECAHO. So that was -- and also the equestrian and the horse legacy is core to our master plan in [ Wyndham ] because we have this horse city is actually a main element in our design and our story of Wyndham, building an ecosystem for horses and improving the community, adding value to Mirbat and maybe providing opportunities for the youth there and opening small markets that can benefit from having this in the project. I would like also to recap on the fact that we have collaboration with the UNESCO since the beginning of our -- since taking the responsibility with the new Board. We started by research, and we wanted research to be core to our strategy. So we had this collaboration with UNESCO to digitalize and revive the story of Mirbat and tied to all everything that we are doing when it comes to strategic planning in the company or in the vision of Mirbat. I would also like to say that sits in our Board, visionary people, I would say, and they are exceptional people when it comes to giving advice in every step of the way. And this is one of the, I think, the major assets we have in Dhofar Tourism that we work with a lot of discussions, a lot of hands-on experience. It's not just ideas, it's actually on the ground being tested and managed. I don't know what else I need...

Is there any question?

In a nutshell if there is anything that you need to elaborate on that we'd be happy to do.

Maybe I'll go first three quick questions. One is in relation to Mirbature and so to clarify that. And then will you be working on a brand personality and so that I feel now personally, I know more because I'm more involved. But it will be good for the -- first the locals and then the targeted customers are more familiar with your story and take along the way with it.

Yes. Of course, Mirbature is the first part of the project. It was the first inspiration to those for Mirbat, everything that represents Mirbat, nature, culture, future, everything. But with the project becoming more mature and more and more studies and more and more engagement with international, other particular companies and experts, we realized that maybe this is not very accessible to everyone. And therefore, we changed it and we started all over again thinking of another way of branding our project, and it is now [Foreign Language] and [Foreign Language] is a word in Arabic that means our -- everything that is possible, everything that can be done in a space of time. And therefore, we changed it and it is actually a more accessible word in Arabic and also sounds really internationally recognized an easily to be actually pronounced and understood. When it comes to creating a brand, yes, of course, this is actually one of our drives to have a brand that is -- or actually create the destinations. We would like Mirbat to become an international destination. People will book their holidays or second one. They just come to Mirbat directly because it will have everything they need to have. So any other questions?

The big question, Najla, is how do we increase revenue? What's our plan for the next 6 months?

And to add on that also, maybe reduce the cost going back to the financial statements. You did a great job with, I think, actually profit and also some improvements, but the administrative costs were high...

So basically, if I may answer that, if you look at the hotel business as of now, hotel relies on selling the rooms. That's the main product we have. And we have segments. So the winter segment is all contract and people flying in from Europe because in Muscat, the weather is better. So why would somebody go down, although they should. The atmosphere in Mirbat is very different. So that segment took a little bit of a dent last year because of the war, the unfortunate Israel issues in Gaza and the war in Ukraine. So in numbers were a little bit less than what we had projected. So the occupancy in that segment was less. This year, we are getting better vibration from the market. And I think our team has looked at different countries also other than East Europe. So they're going to some other destination. So we will see an increase. The other segment, which is a big challenge, as I mentioned earlier, is our Khareef and Sarb. In the past, people thought Mirbat, it doesn't rain, so let's not go there. We go to Salalah only. But I think that's a fallacy. People -- once you go there, you'll find that it does rain in Mirbat, but it's not as bad as Salalah. So one can actually have a better enjoyment outdoor in Mirbat than in Salalah City itself. And that is slowly changing. This year, for the first time in August, our occupancy has been pretty good. So our challenge is to make sure that once the winter season is over, April will be used for maintenance and upkeep and other things, a bit of May for that. And then we are ready in June, July, August, September. So if you do June, July, August, September and a bit of October with 60% occupancy, we will make a lot of money because our product is our room. As you know, if I can't sell a room today, I cannot sell it tomorrow. It's gone. So today's room is finished. It's only be sold tomorrow. So it's lost. So that is the focus of the management, and that has been driven by the CEO and her team that we focus on tapping for [indiscernible] Khareef and Sarb. That's the only way it will go up. Once the room is filled, food and beverage automatically will start we will do the amenities, and other things will start.

And I would like also to say that I mean the tourism market is a very, very sensitive market. Even if there is any false information spreading in the news, this will affect our revenue directly. Sometimes, especially, for example, in the beginning of this last winter season, lots of cancellation happened. It was confirmed but with some rumors about the region and things like that, fully flights are canceled. Actually, there was almost 2 months of cancellation that was actually -- before that, it was actually confirmed, and we had an occupancy, but people get scared, they get scared. Other things related to, I would say, problems with certain entities are fully and the charter flights hold because there was rumor that maybe the charter flight that will be coming to Salalah will not have enough fuel and that caused a lot of people to cancel their flights. And all of these things not directly our responsibility as a country, but we are affected by it in a big way. So I think more discussion with the official people here and then understanding how bad this can influence our revenue. Maybe to them, it is -- but that happens in Dhofar, but that to us a big, big challenge. So things like that sometimes happen, and we need to deal with it. Now regarding June in particular, since Khareef season officially does not start in June. It starts towards, I would say, the end of July -- June and the beginning of July. And with the kids still being in school, it is unlikely for people to be moving and starting the Khareef season. The reality is that mid of July is when this happens, the peak starts. So we work in this downtime that we have as a season, and we try to make it fill with other things. And I think we are making a lot of changes, and we are actually getting more [ minds ] to Mirbat, which was unheard of in Mirbat. Now we have [ minds ] coming to Mirbat. So it is step by step, I think we are getting there...

And the fact that we had a world-class horse beauty contest, that's telling people that the Mirbat is a place to go. So like Mirbat is undiscovered and our objective must be to sell Mirbat.

We are also trying to our best to activate also the old city of Mirbat and put effort in reviving it to a certain extent so people can have something else to do when they are in Mirbat. They can spend the evening outside the hotel. And this is also, I think -- this effort is maybe not starting to be activated in a better way. I just think that we need to have more trust between all stakeholders that we are all working together to improve the destination.

Our high hopes.

Our objective is to make DTC a premier hotel company. Any other questions for -- on financials, on the future plans as discussed and disclosed in the accounts?

No.

If nothing, then thank you very much to all of you.

Thank you. Thank you very much.

And we look forward to seeing you.